The Treasury’s new GENIUS Act proposal would impose a due diligence requirement on exchanges that list stablecoins.
The Treasury Department has issued a Notice of proposed regulation today, explaining how it plans to implement Section 3 of the GENIUS Act, the provision governing who can legally issue a payments stablecoin in the United States and when platforms can offer one built by a foreign issuer.
What’s the scoop?
- Two dates that matter: Beginning in January 2027, issuance of a payment stablecoin in the United States without a federal or state license becomes illegal, unless the issuer is foreign, comes from a jurisdiction that the Treasury deems comparable, and has registered with the OCC. As of July 18, 2028, digital asset service providers can no longer offer or sell stablecoins to Americans unless a licensed issuer has created them.
- A new duty for exchanges: Platforms listing offshore stablecoins cannot simply take an issuer’s word that it will comply with U.S. orders. The Treasury proposal first requires “due diligence,” confirming at a minimum that no secondary trading prohibition is in effect against the issuer, before a platform can rely on that issuer’s own representation.
- No securities law textbook: Rather than borrowing from securities regulation, Treasury proposed a conduct test: A foreign issuer is not considered to have “issued” in the United States if it reasonably believes its purchasers are overseas, maintains real operational controls (not just a paper policy), and does not market its securities to U.S. persons. Knowingly participating in illegal issuance, including market making, white labeling, or coordinating minting, can result in fines of up to $1 million and five years in prison per violation.
- A gentler option has been abandoned: Treasury considered a 36-month transition period plus an exclusion for offshore tokens with a market capitalization of less than about $1 billion held in the United States, then shelved it, deciding that the delay in consumer protections was not worth a smoother rollout. Circle had specifically insisted on identical rules regardless of the type of issuer.
- What’s next: The proposal poses 87 separate questions to commenters and opens a 60-day window once published in the Federal Register on Tuesday.
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